At 11 p.m. on the last day of the month, shoppers flock to the nearest Walmart. They load their carts with food and household items and wait for the midnight hour. That’s when food stamp credits are loaded on their electronic benefits transfer cards.
“Once the clock strikes midnight and EBT cards are charged, you can see our results start to tick up,” says Tom Schoewe, Wal-Mart Stores Inc’s chief financial officer.
As food stamps become an increasingly common currency in a struggling U.S. economy, they are dictating changes in how even the biggest retailers do business.
From Costco to Wal-Mart, store chains are rethinking years of strategy as they watch prized customers lose jobs and turn to this benefit, the stigma of which is disappearing not just in society, but in corporate America.
Besides staffing up for the spike in shoppers on the first day of the month, retailers are adjusting when and what they stock, updating point-of-sale systems to accept food stamps and shifting expansion plans to focus on lower-income shoppers.
Take Costco Wholesale Corp, a warehouse club operator that caters to middle income Americans who must pay $50 a year to shop in its stores. Nudged along by New York Attorney General Andrew Cuomo, who threatened legal action, Costco began accepting food stamps at a few New York stores in May. It now plans to clear the payments in all of its 413 locations in the United States and Puerto Rico.
“Our view was … we would not get a lot of food stamps because our member on average is a little more upscale,” Costco Chief Financial Officer Richard Galanti said in October. “Well, I think that was probably a little bit arrogant on our part.”
As of September, a record of more than 37 million people were enrolled for the government benefit, federal officials told Reuters, an increase of nearly 35 percent since the U.S. slid into recession at the end of 2007.
An estimated one in eight Americans depends on the benefit to buy food. With the nation’s unemployment in double digits, more people are expected to enroll. By some government estimates, up to 16 million people who are not receiving food stamps today could qualify.
What’s more, unemployed Americans are finding that it takes longer and longer to get work. This suggests that food stamps will play a bigger role over the next few years, not just for people, but for stores in need of customers, according to interviews with retail executives, economists, federal and state officials and benefit recipients.
“It is a very important and increasingly important source of revenue for the … supermarkets and stores that have been approved across the country to process those benefits,” Kevin Concannon, U.S. undersecretary of agriculture, said in an interview this month.
Stores have little choice but to respond. And they are.
In the fiscal year that ended in September, 193,753 U.S. retailers accepted food stamps, 17 percent more than the same period two years earlier. “For some chains… it’s 10 to 12 percent of their revenues,” Concannon said. “Depending on how poor the area may be, it may even be higher.”
Tellingly, electronic benefits transfer (EBT) transactions processed by retailers jumped 53 percent this year on a same-store sales basis on Black Friday, the kickoff to the U.S. holiday shopping season, payments processor First Data told Reuters.
EBT includes food stamps and other government benefits like temporary cash assistance for needy families and food assistance for new and expecting mothers.
THE NEW FOOD STAMP SHOPPER
Thelma Zambrano wants to keep shopping at Costco, but can’t afford to renew her membership since losing her customer service job at a bank. Now, she takes monthly food stamp benefits of about $300 and helps others do the same at the Community Action Partnership of Orange County, California, a nonprofit that helps poor people and where she now works.
“Before we made anywhere from $55,000 to $65,000, and right now… I’m lucky if I make $15,000 or $20,000,” said Zambrano, a 26-year-old mother of two from Santa Ana. She and her husband have cut spending to the bone and moved in with relatives.
Most food stamp recipients subsist on earnings below the poverty line — roughly $22,000 annually for a family of four — and many new users are from the ranks of the working poor.
Zambrano’s experience illustrates how the recession also has sent many middle-income families into economic freefall. Their circumstances have, in turn, served as a wake-up call for food retailers that never thought their clientele would depend on public assistance.
For her part, Zambrano let her mother know that a new membership to Costco would make a perfect holiday gift. “She got the hint,” she said. “I’m sure we’ll probably get our membership for the next year.”
Eighty-five percent of food stamp benefits are redeemed at grocery and warehouse stores, and the program means serious business for such retailers. Hard money training.
Tags: costco, economy, food stamp, unemployment, us holiday
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